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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Depreciation Schedules

Wendt Corporation acquired a new depreciable asset for $94,000. The asset has a 4-year expected life and a residual value of zero.

Required:

1. Prepare a depreciation schedule for all 4 years of the asset’s expected life using the straight-line depreciation method.

2. Prepare a depreciation schedule for all 4 years of the asset’s expected life using the double-declining-balance depreciation method.

3. CONCEPTUAL CONNECTION What questions should be asked about this asset to decide which depreciation method to use?

To determine

(a)

Introduction:

Depreciation means decrease in the value of asset within its useful life due to wear and tear of asset or the asset becomes obsolete. Long-term assets are depreciated by business. Depreciation does not involve cash transaction rather it shows how much the asset value has been used over a period.

To prepare: The schedule of depreciation using straight line method for 4 years.

Explanation

Depreciation using straight- line method:

Amount of depreciation= Costresidual valueNo

To determine

(b)

Introduction:

The double-declining balance method of depreciation is a gaining rate of depreciation. The total amount of depreciation in double declining method remains same as in the straight-line method. In comparison to straight-line method the rate of depreciation is quick in the early life of the asset but reduce in the later lifetime of the asset.

To determine

(c)

To state:

The questions that need to be asked to decide which method of depreciation needs to be used.

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